Trading Week Ahead: 2nd – 6th March 2020
Key Events This Week
CNY Caixin Manufacturing PMI
USD ISM Manufacturing PMI
AUD Building Approvals, Cash Rate, RBA Rate Statement
GBP Monetary Policy Report Hearings
USD ADP Non-Farm Employment Change
CAD BOC Rate Statement, Overnight Rate
USD ISM Non-Manufacturing PMI
AUD Trade Balance
OIL OPEC Meetings
GBP BOE Gov Carney Speaks
CAD BOC Gov Poloz Speaks
AUD Retail Sales
OIL OPEC-JMMC Meetings
CAD Employment Change, Trade Balance, Unemployment Rate
USD Average Hourly Earnings, Non-Farm Employment Change, Unemployment Rate
(Times adapted to AEDT timezone)
Where now for the Nasdaq?
As virus worries worsen, markets are rattled and global equities took a plunge last week. In terms of one way traffic, we haven’t seen selling like this since the global financial crisis. Indices like the Dow SPX and Nasdaq lost over 10% in four trading days. Has this been all down to coronavirus? Well, we can’t say for sure but undoubtedly it has been a starting influence, that set the snowball rolling into the avalanche of selling that we witnessed. Markets are known to be vulnerable when they are heavily bought, and that has extended for months. At one point, the Nasdaq was over 40% higher! When everyone starts to exit the trade then things can change quite quickly, a good example of this was last week. Just have a look below at the weekly chart.
Is it time for a corrective bounce?
This week we begin to ask the question, when will the corrective buyback begin? Markets never move in straight lines up or down. At some stage, we will see a corrective fightback from buyers. With Chinese data being released on Monday, traders will be paying more attention to the Caixin manufacturing data to see how the coronavirus has and is currently impacting the Chinese economy. Will we see the shock declines that was predicted by analysts? If there are sharp declines in the data then this could add further strain on already nervous markets.
The RBA is set to meet on Tuesday for the Australian Cash rate, with expectations for a hold. However, with the current worries existing both locally and globally, could we see the RBA step in with a 25 point cut? A hot housing market has been holding their hand and with retail sales data later in the week, a sharp drop in that figure could be enough to start the calls for another cut getting stronger. On the off chance we do see a cut on Tuesday, or hints of future cuts in the statement, we could see the AUD get a little cheaper to the majors.
Another one to watch this week is the OPEC meeting. Will we hear anything more concrete regarding supply cuts? Oil continued to be hit by selling last week with a price that plunged to over 12%! Price around the $45 level can’t be good for OPEC producers. Surprisingly, there has been no mention of an action plan to try and support prices.
The week concludes with U.S. and Canadian employment data and the Canadian trade balance. Last time around we saw a rise in U.S. unemployment. Will this trend continue?